Change in China

Every television panel I have been on to discuss the Chinese Communist Party Congress has asked the same thing: what are the chances of reform in China? The answer is pretty little. There will be some shifts in the economy. But nothing in the political realm. Here’s why I think it won’t.

Each successive leader in China is weaker than his predecessor. Xi Jinping will be part of a standing committee of seven in which four will be proteges of Jiang Zemin and his premier, Li Kejiang, is closest to Hu Jintao. But he has been compensated with the top slot of the military.

Going by Willy Lam, there are three basic factions in the party today: Jiang’s, Hu ’s and the leftovers. None of hem differ on the need to maintain the political monopoly of the party. None of them have shown interest in opening up the system, though Taiwanese sources tell me they believe Hu had the germs of reform in him. If so, he never let them germinate.

Anyway, that rules out political reforms.

What differentiates them on the political side? The answer is nothing that I can detect. They sll want stability, understand China will have to adjust to a new regime of lower growth but like the present structure of the Chinese economy. Why? Because of lucre. Some estimates say about 100 families dominate the economy. All these party leaders, or/and their children and relatives, have made hundreds of millions of dollars from their business activities.

At the heart of this kleptocracy are China’s massive state owned enterprises. But as James McGregor and economists like James Pettis have pointed out, these government firms are at the heart of China’s structural economic defects — and a source of concerns over Chinese neo-imperialism.

However it is very unclear as to how the present leaders can unwind the state sector’s control without endangering their own fortunes. The sense is that they can’t.

In which case only a modicum of economic reform can be expected. Such changes will move trillions and keep China growing. But they will be old wine in new bottles. Which is not enough.

Let’s revisit this in 2017, when five of standing committee of today will retire. Perhaps change will come to China then.